Smithfield shares jump after Farmland

Jennifer Waters

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SMITHFIELD, Va. (CBS.MW) -- Shares of Smithfield Foods rallied 10 percent in heavy trading Monday after the hog processor picked up the assets of bankrupt Farmland Foods in a weekend auction that gives it a bigger stake in U.S. pork processing.

Smithfield
SFD,
-5.66%
shares ended the session at $20.85, pennies away from a fresh 52-week high. Nearly 2.06 million shares traded hands -- about 1.5 million more than the three-month daily average volume.

Smithfield said it will pay $367.4 million in cash and will assume most of Farmland's liabilities, including $90 million in pension obligations plus the associated assets of both Farmland Foods and Farmland Industries. The deal, which includes three hog slaughter plants and four procession plants, is subject to bankruptcy court approval.

Smithfield said the acquisition should be immediately accretive to earnings.

Teitelbaum said he sees "substantial" earnings added from the acquisition of Farmland, a smaller pork processor it has been trying the buy for more than a year. In Sunday's bidding in Kansas City, Mo., Smithfield outbid Cargill, the nation's largest privately held company and the biggest producer of meat.

Teitelbaum noted that the U.S. Justice Department said it would not block a Smithfield purchase since Smithfield would not hold more than 30 percent share of the pork market. The buy catapults Smithfield to a 27-percent market share.

"With Smithfield's strong position in the Southeast combined with Farmland's dominance in the Midwest, the two operations complement each other geographically and should accrue to the benefit of the retail supply chain," Teitelbaum wrote.

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Jennifer Waters

Jennifer Waters covers everything that impacts consumers for MarketWatch and writes the Consumer Confidential column. She is an award-winning reporter who has covered a wide variety of beats during her more than 10 years with MarketWatch. Waters is a regular contributor to local and national TV and radio stations, including Fox News and Fox Business News, as well as the Wall Street Journal.

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